Sunday, August 12, 2007

Still making moves south of the border

Slaying Vampires: Chavez Proposes South American Energy Treaties

Written by April Howard

Image''Argentina is freeing itself from Dracula, breaking the chains of the International Monetary Fund,'' Venezuelan president Hugo Ch├ívez said from Buenos Aires. During a current tour of Latin America, Chavez named regional strength as his goal for a new “energy security treaty” with Argentina.

Hugo Chavez announced in Buenos Aires on August 8th that he had signed an "energy security treaty" with Argentina. Currently, Argentina is experiencing an unusually cold winter and a lack of fuel, due to increased energy needs. Building new industries in Venezuela and supplying Venezuelan gas to Argentina, he said, are actions meant to diversify economies and increase national sovereignty and regional integration across the continent.

Chavez also announced plans to make similar agreements to guarantee an energy supply to the countries of Uruguay, Bolivia and Ecuador, which are the next stops on his current tour of the region. The agreement calls for "ample and sustained co-operation" on energy initiatives, including "the distribution of natural gas through pipelines, joint oil refining projects and coordinated efforts on distributing power and alternative fuels."

Mercosur Melancholy

During the visit, Argentine President Kirchner said he supports Chavez's effort to make Venezuela a full member of the Mercosur, the South American trade bloc. Members Argentina and Uruguay have approved Venezuela as a new member, but members Paraguay and Brazil haven’t agreed. Brazilian President Luiz Inacio Lula da Silva is currently on a tour of Mexico and Central America, making biofuel agreements along with other deals. Brazil is on a political and economic upswing, based mainly on the booming agrofuel industry.

Some Brazilian politicians have claimed that Venezuela hasn’t complied with Mercosur's commitment to democracy, due to Chavez's decision last May not to renew Radio Caracas Television’s (RCTV) broadcast license. The Chavez administration says that RCTV played a role in a failed coup in 2002.

Repackaged Debt

The treaty’s announcement on Monday was prefaced by Chavez’s confirmation of Venezuela’s commitment to buy up to $1 billion in Argentine bonds, to help Argentina free itself from "Dracula:" the International Monetary Fund (IMF). In 2001, Argentina defaulted on $100 billion in debt to the IMF, later paying creditors less than a third of that amount. In the beginning of 2006, Argentine President Nestor Kirchner initiated a repay of the remaining $9.6 billion to the IMF, in an attempt to achieve greater economic independence.

The Chavez administration, one of the main sources of financing for the Argentinean government since 2005, is expected "to repackage the Argentine debt with Venezuelan bonds for sale in the domestic market to soak up excess liquidity in the economy and serve pent-up demand for foreign exchange." The first half of the purchased bonds will be made into a part of the third release of the joint Argentine-Venezuelan Bono del Sur (Bonds of the South). According to the AP, "the Venezuelan government has profited by reselling Argentine debt, and has used such bond sales as a tool to beat back inflation, which last year reached 17 percent amid heavy government spending."

Chavez described the bond purchase as a step towards the creation of an alternative financial system in Latin America. Chavez sees this project as symbolized by the Bank of the South, which he said will bring the region "toward our financial independence, freeing us from the perverse chains of the International Monetary Fund."

Regional Integration

While the concept of the "energy security treaties" follows Chavez’s trend of gaining allies through "petro-diplomacy," based on Venezuela’s large oil and gas reserves, but Chavez stressed the idea of energy cooperation as a mutually beneficial act.

Kirchner and Chavez also agreed to unite companies from both nations in a South American oil company. The company, to be named Petrosuramerica, will develop joint projects to complement the two nations' economies. Chavez also made plans with Argentina’s National Institute of Industrial Technology (INTI) "to build 56 factories in Venezuela in 21 different sectors, from food . . . to the production of electric motors," and a separate cooperative project to produce milk.

With Argentina’s help, Chavez said, Venezuela could develop industry, diversify its own economy, and move away from "the oil sultanate economic model." During the visit, Chavez also confirmed that Venezuela will help Argentina by financing a $400-million gas plant.

According to the "energy treaty," the countries will work together in Argentina over the next two years to construct a liquid natural gas refinery to refine Venezuelan gas. In the near future, the gas will have to be transported to Argentina by sea, since the multinational Gas Pipeline of the South project is on hold. Chavez promised continued construction of the Pipeline, which is intended to bring Venezuelan gas to Brazil and Argentina.

Chavez sees regional integration as a tool for creating economic and political power. "With the advances of Argentina in petrochemicals, along with the Venezuelan material initiatives, we can convert South America into a world power in petrochemicals," he said.

Also while in Argentina, Chavez noted that "The United States has 5% of the world's population, but it consumes more than 20% of the energy used in the planet." He said that the US’s "insatiable voracity" for oil has led it to violently force its will on Latin America in the past.

Original article posted here.

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